Age-associated osteopenia/osteoporosis (Senile or Type II) develops because there is a decrease in bone formation relative to resorption resulting in net loss of bone. In association there is an increase in the amount of adipose in the endosteal cavity. Numerous studies in humans and animal models have shown that there is a strong inverse correlation between marrow fat and bone formation. Our central hypothesis is that the development of marrow fat results in decreased bone formation. Our mission is two-fold;first, to definitively prove that the development of marrow adipocytes has a deleterious effect on bone formation, and second, to understand the mechanism of adipocyte-regulated osteoblast inhibition. Given the complexities of the endosteal compartment, the influence of systemic factors, and the shared precursors of osteoblasts and adipocytes, this is an intractable problem that requires a truly unique investigative approach. Four possible hypotheses may explain how marrow adipocytes affect bone formation. First, the differentiation of marrow mesenchymal stem cells (MSC) to adipocytes may limit osteoblast differentiation (H1: Differentiation shift). Second, adipose development may deplete the pool of available osteoblast stem cells (H2: MSC depletion). Third, adipocytes could secrete factors that regulate bone formation (H3: Paracrine effect). Fourth, through contact inhibition, adipocytes could affect the development or activity of new osteoblasts (H4: Contact inhibition). A unique aspect of our proposal is that we are not focused on a single hypothesis, but will address all four using ten different knockout and transgenic mice. MSC from these models will be used in a unique model of appositional bone formation whereby precursors cells are implanted in host mice to form a bone ossicle with an intact fatty-marrow cavity. We propose three specific aims: (1) To examine bone formation in models that have either increased or decreased adipocyte differentiation, (2) To examine bone formation in a model where fat can be regulated through targeted apoptosis, and (3) To examine the role of paracrine signaling by leptin, adiponectin, or PPAR-gamma agonists. If successful our study will demonstrate whether adipocytes truly impact osteoblast development or function, and further, we will demonstrate the mechanism(s) of adipo-regulation. Understanding the function of adipocytes in regulating bone formation is paramount for developing new therapies to address age-associated bone loss.